Lincoln slumps as costs erode profit

NEW YORK (MarketWatch) -- Lincoln Educational Services shares plunged more than 24% Monday after the company's second-quarter earnings tumbled from the year-earlier period on sharply higher costs.

Shares of West Orange, N.J.-based Lincoln
LINC, +0.92%
were last down $4.83, or 24.3%, at $15.02. The shares were the biggest percentage decliners within the Nasdaq Composite.

The for-profit educational company said it earned $40,000 in the quarter to break even on a per-share basis, after earning $900,000, or 4 cents a share, the year earlier.

Earnings were dented by a 22% rise in educational services and facilities expenses, mostly due to higher costs for teaching, books and tools.

Selling, general and administrative costs climbed 16.4% as the company increased its spending on marketing and sales.

"Marketing expenses alone increased 37.2% due to increased cost of advertising (television, print and Internet) as well as increases to drive new student enrollments," Lincoln said in a statement.

The rise in costs pushed operating margins down to 1.2% from 3.6% in the year-earlier quarter.

Revenue rose to $68.2 million from $59.2 million.

Looking ahead, Chief Executive David Carney said the company is expecting the third quarter to be its strongest as it usually is. Historically, enrolments pick up in the third and fourth quarters as graduating high school students enter the company's classes, he said.

Lincoln is expecting earnings of 17 to 21 cents a share in the third quarter, on revenue of $78 to $82 million.

For the full year, the company is expecting earnings of 73 to 81 cents on revenue of $305 to $315 million.

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